The Class-Action Lawsuit Against Novo Nordisk

Have you ever fantasized about suing drugmakers who jack up the price of insulin? Novo Nordisk is being sued for its drug pricing, but not by its customers.

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A class action lawsuit has been filed against Novo Nordisk by a group of investors who say they were misled about earnings forecasts. It’s alleged the drugmaker hid market trouble by colluding with other drug companies to keep the price of insulin artificially high. The lawsuit was filed by Bernstein Litowitz Berger & Grossmann LLP on behalf of the Lehigh County (PA) Employees’ Retirement System, but it can include anyone who invested in Novo Nordisk between April 30, 2015 to October 27, 2016.

(As much as it may seem like buying a vial of Novo insulin is expensive enough for one to be considered an investor in the company, the lawsuit does not include customers.)

The suit seems to stem from an overly optimistic earnings forecast in early 2016 that projected long-term growth of 10 percent, according to a Law360 report. That projection was fueled by triple-digit growth for its new basal insulin, Tresiba, according to a Motley Fool report. Novo’s plan was for Tresiba to become the Lantus-killer in the basal insulin market, but that dream was derailed with Eli Lilly’s December release of Basaglar, a biosimilar (read “generic”) version of Lantus. With Basaglar on the horizon and increasing public unease over high drug prices, pharmacy benefits managers have been able to negotiate steep discounts with insulin makers, or exclude some expensive brands altogether. This has cut into sales of Tresiba and Victoza, a GLP-1 drug.

Novo stock, which had been trading at more than $53 a share a year ago stands at $35.73 as of January 17, 2017. In 2016, Novo’s CEO stepped down, and the company announced plans to cut 1,000 jobs.

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The 2016 presidential election also brought a high level of uncertainty to the business plans of insulin makers. In October, two prominent lawmakers asked the Justice Department to investigate insulin price fixing. Pharma companies bracing for increased regulation under Hillary Clinton rallied when Donald Trump surprised nearly everyone by winning the electoral college vote. That rally proved fragile, however, as Trump has periodically made overtures about curbing drug prices. Most recently, during a wide-ranging press January 11 press conference, Trump said drug companies were “getting away with murder.” That was enough to send drug company stock value tumbling, according to a CNN Money report.

So far there has been no word of copycat class action lawsuits from investors with the other insulin-making companies.

| April 10th 2015

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